[Yonhap]
[Yonhap]

Dollar deposits at South Korean banks swelled by nearly 9 trillion won ($5.97 billion) this month as the won-dollar exchange rate fell into the 1,400-won range, drawing in bargain buyers among individuals and companies alike.

Dollar deposit balances at the five major commercial banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — totaled $70.9 billion as of Thursday, according to banking industry data released Sunday.

That is the largest combined balance since the end of December 2022, when the figure stood at $74.42 billion. Converted at Thursday afternoon's rate of 1,501.4 won per dollar, the total comes to roughly 106.4 trillion won.

Dollar deposits have been rising steadily for several months. The balance stood at $58.76 billion at the end of March, climbed to $61.82 billion at the end of April, $62.99 billion at the end of May and $65.04 billion at the end of June, before accelerating further this month.

In just seven trading days this month, deposits jumped by $5.86 billion — about 2.8 times the $2.06 billion increase recorded throughout all of June.

Both individuals and companies added to their dollar holdings. Individual dollar deposits reached $12.22 billion as of Thursday, up $244 million, or about 2 percent, from the end of June.

Individual holdings had fallen by $813 million over the previous two months as the won weakened sharply and depositors locked in profits, but buying has resumed as the exchange rate has come back down.

In fact, the daily average amount exchanged from won to dollars at the five major banks this month has risen to $7.93 million, well above the June daily average of $4.08 million.

Corporate dollar holdings also expanded. Corporate dollar deposits rose to $58.69 billion this month, up $5.62 billion, or about 11 percent, from the end of June — extending a four-month streak of consecutive increases.

That figure is also the largest since the end of December 2022, when corporate deposits stood at $62.05 billion.

"Corporate demand for foreign currency continues to grow, driven by import payment settlements, overseas investment and exchange-rate risk management," an official at one commercial bank said.

However, some signs of dollar selling have also emerged recently. Analysts attribute this partly to growing expectations of further won appreciation following SK hynix's listing of American depositary receipts on NASDAQ.

"Dollar deposit balances peaked in early July and have since declined," an official at another commercial bank said. "Corporate deposits in particular have fallen sharply — it appears some companies sold dollars after the government encouraged corporate foreign-currency sales and the exchange rate moved lower."

The won-dollar rate had approached 1,560 won in early July before falling roughly 60 won. The rate closed at 1,498.5 won on Friday, down 11.0 won from the previous session, and 57.3 won below the July 2 weekly closing rate of 1,555.8 won.

On Wednesday, the rate fell as low as 1,498.1 won during trading, dipping below the 1,500-won mark for the first time in about a month, and has continued to trade below that level intraday since.

Market participants see two main drivers behind the won's recent strengthening: wariness of intervention by foreign exchange authorities, and forward-dollar selling ahead of SK hynix's ADR listing.

SK hynix priced its ADR offering at $149 per share, raising a total of $26.51 billion — more than 70 percent of South Korea's trade surplus last month, which stood at about $36.2 billion.

The Korea Center for International Finance said in a recent report that SK hynix is expected to bring in the proceeds gradually over time to avoid a shock to the foreign exchange market. "The company appears to have already sold forward contracts ahead of the listing, which has already contributed to the won's strengthening," the center said.

Min Gyeong-won, an economist at Woori Bank, said SK hynix's ADR listing is set to inject up to $1 billion in fresh dollar liquidity per day, which "could draw out preemptive dollar selling from exporters and heavy-industry companies."

With the exchange rate falling sharply in a short period, market participants are moving in different directions — individuals buying dollars at what they see as a low, while companies focus on managing currency risk. Attention is now turning to whether the surge in dollar deposits will continue, depending on the direction of the exchange rate and the pace at which SK hynix's ADR proceeds flow into the market.


rainbow@heraldcorp.com